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Saturday, 23 May 2015

The next five years - this week's Energy Crunch from the nef

This is the latest from the New Economics Foundation:

Energy and climate policy was scarcely
mentioned during the UK election campaign. With a new government in place much
sooner than expected, what do the next five years hold? The appointment of Amber Rudd as the new Energy
Secretary was welcomed
by environmentalists, with the Renewable Energy Association hailing her as
“a champion of renewables and low-carbon economy”. But then, as her predecessor
Ed Davey found, policy in this critical area is not exclusively controlled by
the Secretary of State. On low-carbon policy the Conservative manifesto
is mixed: it pledges to support value for money renewables while simultaneously
promising to abolish financial support for new onshore wind farms – one of the
cheapest low carbon energy options. The new government is also a staunch
supporter of fracking – but those
hoping to replicate US expansion would be wise to notice the tide is turning
(see our chart of the week). Whether the fall in US shale output is
temporary or terminal remains to be seen, but at least one prominent financier
is scathing
about the industry’s prospects. Shares in drilling companies plunged after
hedge fund manager David Einhorn, famous for predicting the collapse of Lehman
Brothers in 2008, likened the industry’s business model to “using $50 bills to
counterfeit $20s”. Others predict output will recover if the oil price continues
to rise – recently recovering to around $67 per barrel. But geologist David
Hughes points to longer
term output decline, since output per well is falling in key areas where the
best parts have been tapped first. Either way, as the International Energy
Agency noted,
the fall in production brings a multiyear winning streak to a close.Betting on cheap fossil fuels in the long-term
is always risky. The New Climate Economy’s latest
report makes this point clearly: fluctuations in production and price hurt
investment, growth and jobs. Of course if you factor in climate change then
there’s no such thing as cheap fossil fuels full stop. In the UK, we can only
hope that our new Energy Secretary can build and defend sensible policies,
putting us on the track to a low-carbon economy.Best wishes,Griffin CarpenterCo-editor, Energy
Crunch